1. COMMERCIAL RUNOFF

2. Advantages (vs. rehab or liquidation) Preserves greater estate value for the satisfaction of insurance liabilities. Preserves greater estate value for the satisfaction of insurance liabilities. Faster and more effective claim resolution. Faster and more effective claim resolution. Avoids protracted delays in the collection of reinsurance recoverables. Avoids protracted delays in the collection of reinsurance recoverables. Quicker resolution of the estate obligations. Quicker resolution of the estate obligations. Lower administrative cost during the pendency of the runoff. Lower administrative cost during the pendency of the runoff.

3. Disadvantages Regulators are not yet comfortable with nonjudicial runoff of distressed insurance companies. Regulators are not yet comfortable with nonjudicial runoff of distressed insurance companies. Regulators perceive greater risks in supporting a commercial runoff vs. a proceeding. Regulators perceive greater risks in supporting a commercial runoff vs. a proceeding. Permitted practices may be needed to sustain accounting solvency. Permitted practices may be needed to sustain accounting solvency. Ultimately a proceeding may not be avoidable. Ultimately a proceeding may not be avoidable.

4. Is Every Financially Distressed Insurance Company a Viable Runoff Candidate? Accounting vs. economics. Accounting vs. economics. Cash is king and queen. Cash is king and queen. Operation must be cash flow neutral or better. Operation must be cash flow neutral or better. Investment income and operating expenses. Investment income and operating expenses.

5. Role of the Regulator Political issues. Political issues. Second guessing by non-domiciliary regulators. Second guessing by non-domiciliary regulators. Cooperation. Cooperation. Permitted accounting practices or allowances. Permitted accounting practices or allowances.

6. Types of Runoffs Traditional. Traditional. Nonjudicial liquidation. Nonjudicial liquidation. Direct business vs. reinsured. Direct business vs. reinsured. Liquidation priorities. Liquidation priorities. Other non-insurance creditors. Other non-insurance creditors.

7. The “End Game” Payment of dividends during the pendency of the runoff. Payment of dividends during the pendency of the runoff. Challenges of extracting excess value. Challenges of extracting excess value. Winding up under a formal proceeding. Winding up under a formal proceeding. Creation of a liquidating trust outside of a proceeding. Creation of a liquidating trust outside of a proceeding. The new Rhode Island statute. The new Rhode Island statute. Conversion of an insurance company to a “C” corporation. Conversion of an insurance company to a “C” corporation.

8. Other Issues ADC and LPT covers ADC and LPT covers Investment quality and duration Investment quality and duration Liquidity Liquidity

9. Role of the Actuary in a Runoff Looking through the rearview mirror. Looking through the rearview mirror. Exposed but not recognized “EBNR”. Exposed but not recognized “EBNR”. Statistical challenges. Statistical challenges. Modeling. Modeling.